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Analysis of AAR Decisions of State of Haryana

The ruling of any advance ruling authority under GST is nothing but the interpretation of GST law. If an individual seeks clarity on any provision of GST, he can make an application before the authority to clarify the same. For the said purpose, an authority is established in every state called Authority for Advance Ruling. The Haryana Authority for Advance Ruling is established by the Haryana State government under Section 96 of the Haryana SGST Act. Section 97(1) is the section which provides that an application can be made by thr applicant for seeking clarity on any question laid down in Section 97(2).

Section 97(2) of the said Act laid down certain questions on which an individual can seek ruling. They are:
  • classification of any goods or services or both.
  • applicability of a notification issued under the provisions of this Act;
  • determination of time and value of supply of goods or services or both;
  • admissibility of input tax credit of tax paid or deemed to have been paid;
  • determination of the liability to pay tax on any goods or services or both;
  • whether applicant is required to be registered
  • whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term
The objective of any advance ruling, including under GST is to:
  1. Provide certainty for tax liability in advance in relation to a future activity to be undertaken by the applicant
  2. Attract Foreign Direct Investment (FDI) – By clarifying taxation and showing a clear picture of the future tax liability of the FDI. The clarity and clean taxation will attract non-residents who do not want to get involved in messy tax disputes.
  3. Reduce litigation and costly legal disputes
  4. Give decisions in a timely, transparent and inexpensive manner

1. In Re M/S Alwa Infra
(HAR/HAAR/R/2018-19/13 Dated 18.09.18)
Facts:
The HAFED (Haryana State Cooperative Supply and Marketing Federation) Ltd. was notified by the State government of Haryana as the nodal agency for the construction of godowns under the “Scheme for Construction of Godowns for FCI-Storage requirements, through private entrepreneurs, 2008”. This scheme was brought by the Government of India. Thus HAFED undertook the work of construction of Godowns in Haryana as per the orders of Central government.

The scheme consist two kinds of works:
  1. On lease only basis
  2. On lease and service basis

In one case, the private party aka the constructor will build the godown and it will be leased out to HAFED to manage the storage, warehousing and preservation activities of FCI. In other case, the godown will be leased out to HAFED but the above mentioned services will be rendered by the constructor itself but under the supervision of the HAFED.

HAFED called out tenders from the private parties for the purpose of constructing godowns for FCI storage requirements. The applicant also participated in the tender process and since the applicant quoted the fewer prices among other participants, there were given the letter of allotment for the said construction work at Elenabad which is one of the selected places for construction of godowns. The rent rates were fixed on the basis of per quintal per month.

The arrangement among the HAFED, FCI and the applicant is tripartite i.e. one between HAFED and the applicant and the other between HAFED and FCI. The agreement HAFED entered into with the applicant is of “Lease and Service” basis type.

Under the CGST Act, 2017, ‘rent received on leasing of immovable property' is taxable but the ‘storage or warehousing of agricultural produce' is non-taxable.

Under the agreement between the HAFED and the applicant, the lessor has to pay the service tax and can be claimed from the applicant besides the monthly rent by furnishing the service tax invoice. While the agreement between the HAFED and the FCI says that the applicant has to pay the tax and can claim it from the FCI through HAFED.

Question on which advance ruling is sought:
Whether GST should be paid on the godown built by the applicant and leased to HAFED and the services are provided by the applicant under the supervision of the HAFED.

Applicant's contention:
The applicant contended that they have been refunded 3.43 crores amount continuously for 3 yeasr by the FCI for paying service tax by them. They were not being refunded for the past 2 years even after depositing the tax amount in treasury by them. As a result of this, they are suffering losses.

The taxation commissioner's contention:
  1. The renting and leasing of immovable property is supply of services according to Section 7 read with Schedule II Sr No.5 of CGST Act and HGST Act. Applying the said provision to present scenario where the applicant is the owner of the immovable property which he let out on lease to HAFED and therefore it should be treated as service.
     
  2. There are two notifications, Notification No.46/ST-2 and No.47/ST-2 issued in 2017 which exempted the support services for agriculture like loading, unloading, packing, storage and warehousing of agricultural produce from GST but not godowns for commercial use according to the terms of the agreement. To be eligible for exemption, any service would help the cultivation of plants.
     
  3. Therefore, the rent paid by the HAFED to the applicant is taxable in the hands of applicant @ 18% since it is for commercial use and the reimbursement depends on the terms of the agreement.

Ruling:
Clause 19 of the agreement between the HAFED and the applicant states that the lessee can use the godown to store the goods of FCI as well as his own goods and also goods of third parties. Thus as per the terms of the agreement HAFED is free to use the godown to store any other goods belonging to a party other than FCI.

Thus the services they provide are not only support services for agricultural produce but also letting put non-residential property for commercial use and the supply of these services are not dependent on each other. Therefore, the supply will become a mixed supply and thus should be taxed according to Section 8 of the CGST Act i.e. highest tax rate of both the services will be levied on both the services.

2. In re M/S Boldrocchi India Pvt Ltd.
(HAR/HAAR/R/2018-19/12 Dated 18.09.18)
Facts:
The applicant was asked by one of its customer to supply WTE plant boiler's flue gas cleansing system as the customer wants to set up a waste to energy plant. The supply will be from vendor factory of the applicant situated within India and some of the supply will be from the applicant factory itself to the customer located in India.

Question on which ruling was sought:
Clarification on the HSN code of the WTE plant boilers flue gas cleansing system supplied by the applicant and the applicable rate of tax for such supply of goods under the GST Act, 2017.

Applicant's contentions:
  1. The waste to energy converting devices are classified under the HSN code no. 84 05 10 90 and is levied 5% GST.
     
  2. These kinds of goods are exempted even in the indirect tax regime also by the Ministry of Finance and Ministry of New and Renewable energy. This exemption was given in order to promote the use of renewable energy. But in GST though not exempted fully, the goods related to renewable energy is taxed 5% IGST and the same was stated in Notification No 33/2005.
     
  3. The invoice also clearly states that the supply is of waste to energy plant boilers fuel gas cleaning system to JUIL's Guntur waste to energy project.

    Ruling:
    The product of supply in this case is the nature of pollution control device which comes under the HSN classification 8421 i.e. Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquid or gases. Moreover, the product in question cannot form an integral part of the waste to energy plant devices in general because their nature depends upon its actual use. The products under the classification 8421 are taxable to 2.5% CGST and at the same rate in SGST also.

3. In re M/s Pasco Motors LLP
(HAR/HAAR/R/2018-19/11 Dated 30.08.18)
Facts:
The applicant engages in the retail-trading of trucks and sought advance ruling in two situations put forth by them.

Situation 1:
They bought goods from M/s Tata Motors Ltd from Jamshedpur, Lucknow and Pune. The goods take around 5 to 10 days to reach the applicant. The seller raises invoice after receiving the advance amount from the applicant and put the goods in transit. But the goods will reach the applicant in the following month. Thus the applicant can sell those goods in the following month only. The applicant has to pay the tax on monthly basis. In such case, can it be eligible to claim input tax credit in the previous month for those goods which will arrive in next month and the goods are in transit by then.

Situation 2:
The applicant to meet the sales target at the end of the month announces incentives to customers. Then the demand for the goods increases and the applicant raises invoice to the customers but the goods will be delivered in the next month that is after the applicant receives it.

Questions on which ruling was sought:
  1. What time is to be treated as the time of receipt of goods so as to avail the input tax credit?
  2. What is the time of supply since the invoice is raised though the goods are not in the possession of the applicant?

Applicant's contention:
  1. When Section 2(62) is read with Section 16, it is clear that Input tax credit can be claimed in the same month when the invoice is raised.
  2. By plain reading of the Section 2(82), it is clear that the applicant is liable to pay tax in the same month in which the invoice is raised though the applicant did not deliver the goods on which he raised invoiced.
     
Tax Authorities Contention:
  1. That the input tax credit can be availed only when the applicant receives the goods physically. If the goods are supposed to be received in instalments, then the input tax credit shall be available only to the extent of the goods he received.
  2. The law does not allow raising invoices without delivering the property.

Ruling:
  1. The explanation to Section 16 is about the when the goods are delivered to a person other than the buyer on the directions of buyer. In that case, it shall be deemed to be received by the buyer. This explanation is not applicable in the present case since both the buyer and recipient are one and the same. Therefore, the goods are deemed to be received only when the buyer receives it and only then the buyer can claim inout tax credit.
     
  2. Section 12 specifies that time of supply will earlier of the date of issue of invoice by the supplier or the last date on which he is required to issue invoice under Section 31(1). Therefore the date of issue of invoice will be the time of supply even though the goods are delivered at later point of time.

4. In re M/s United Mining Corporation
(HAR/HAAR/R/2018-19/05 Dated 14.08.18)
Facts:
The applicant does its business in mining of Boulders in Haryana. The State government granted mining lease to the applicant for extracting ‘stone along with associated minor minerals'. Boulders are classified under heading 2516 and are taxable to 5% GST on their supply according to the said classification.

The lease agreement states that the lessee has to pay one instalment of dead rent which was decided to be 20.99 crores and the then royalty has to be paid for the mineral extracted and supplied by them or dead rent whichever is higher on a monthly basis. As per the terms of the deed, they should also pay 10% as rural development fund in addition to dead rent.

Questions on which ruling was sought:
  1. What is the nature of the service provided by the State government to the applicant and under what head it will be classified under the GST?
  2. Whether the service comes under the chapter 9973 as Licensing services for the right to use of minerals including its exploration and evaluation?
  3. What is the rate of GST to be paid for the services provided by the state government for which the applicant is paying the royalty?

Tax authority's contention:
  1. The applicant should pay GST at general rate of 18% on the royalty paid by it as per Section 9(3).
  2. The supply of minerals attracts 5% IGST (2.5% CGST + 2.5% HGST) and the applicant is already paying such.

Ruling:
According to the Notification no. 11/2017-CT (Rate) dated 28.06.2017 along with its annexure specifies that the classification 9973 includes licensing services for the right to use minerals including its exploration and evaluation. Royalty is the amount paid by the applicant for availing the right to use the minerals granted to it through lease for a specified time. According to the notification the aforesaid services attracts the same rate of tax as on supply of goods involving transfer of title in goods.

According to the entry no.5 of the Notification no. 13/2017-CT (Rate), dated 28.06.2017 under the CGST Act and the corresponding notification under HGST Act, the applicant is liable to discharge the tax liability on such services provided by the Haryana State government on reverse charge basis.

5. In re YKK India Pvt Ltd.
(HAR/HAAR/R/2018-19/04 Dated 11.07.18)
Facts:
The applicant is engaged in the business of supply of slide fasteners and chain sliders etc. For this purpose, the applicant it uses various goods and services for which it has to pay GST. This tax amounts to input tax under Section 2 (62). The applicant's factory is located at a remote place in Haryana so that it depends on transportation service providers (Deep Travels) to provide transportation services to the employees working in that factory. Thus the applicant entered into a contract with the Deep Travels.

The service provider raised invoice on the basis of usage and the invoice consists of GST as the service is classified under HSN 996413 viz. Non-scheduled local bus and coach charter services and this classification attracts 18% GST.

Questions on which ruling was sought:
  1. Whether the applicant can claim input tax credit on the service of hiring of buses and cabs?
  2. Whether the restriction “Rent a cab” service specified in Section 17(5)(b)(iii) is applicable to ITC on hiring of buses and cabs?
Ruling:
The Section 17(5) specifies exceptions for the availment of Input Tax Credit. One of the exception reads ‘rent-a-cab, life insurance and health insurance except where the government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force and such inward supply of goods or services or both of a particular category is used by a registered person for making an outward supply of the same category of goods and services or both as a part of taxable mixed or composite supply.

Since the meaning of ‘rent a cab' is not provided in the statute, reference is made to the general meaning that cab means a vehicle along with driver which has been taken on rent/hire for transportation purpose. And thus hiring of buses and cars to carry large number of passengers would come under “rent a cab”. Therefore, the supply of the applicant is ineligible for claiming ITC under Section 17(5) of the CGST/HGST Act.

6. In re M/s Oscar Security and Fire Service
(HAR/HAAR/R/2018-19/01 Dated 20.06.18)
Facts:
The applicant is engaged in the business of outsourcing. The applicant provides Man power services to Medical colleges, State universities and also to hospitals. For their services, they were charging service tax from the educational during pre-GST regime and GST in the GST regime. But the educational institutions are saying that they are exempted from the GST according to notification no. 12/2017 dated 28.06.2017.

Question on which ruling was sought:
Whether the medical institutions are exempted from paying GST or not?

Tax authority's contention:
According to the said notification, services provided to an educational institution, by way of, transportation of students, faculty and staff, catering mid-day meals sponsored by any government, security or cleaning or housekeeping services, admission and conductance of exams services will attract nil rate of tax. Since this exemption is not extended to man power supply service, it attracts GST.

Ruling:
The proviso to the classification under the said notification says that it is applicable to institutions providing higher secondary level education. Therefore, hospitals, colleges and universities are not exempted under this notification.

7. In re BM Industries
(HAR/HAAR/R/2018-19/02, Dated 29.06.18)
Facts:
The applicant is engaged in the business of manufacturing and sale of aluminium profiles. The applicant is a firm with fixed assets, current assets and liabilities. The applicant wants to merge with M/s Bimal Aluminium Pvt Ltd as a going concern. The applicant is a registered firm under GST and the firm with which it is going to merge is also got registered under GST.

After the merger, the applicant firm will lose its existence. All the assets and liabilities of the firm will become the assets and liabilities of the Bimal company. The applicant firm, after merger, will get it registration under GST cancelled.

Question on which ruling was sought:
  1. Whether the applicant is liable to pay tax under GST, on the merger as a going concern?
  2. Whether the unutilized ITC of the applicant will be available to M/s Bimal company?

Applicant's contention:
According to Section 29 of the CGST/HGST Act and Rule 41 of the CGST/HGST Rules, there is no need to pay tax in case of merger of proprietorship firm with a company and the unutilized ITC of the applicant will be available to M/s Bimal company.

Ruling:
Section 18(3) of the CGST/HGST Act and Rule 41 of the CGST/HGST Rules say that in case of a sale, merger, amalgamation, lease or transfer of a business, the unutilized ITC shall be allowed to transfer to the other party to whom the business is accrued through sale, lease, merger etc. But the above provisions would not apply to unutilized balance of electronic cash ledger. It only applies to unutilized ITC.

According to Schedule 2 para 4, when the business is transferred as a going concern, it shall not be deemed to be supply in the course of business or furtherance of business. Thus, the merger of the applicant as a going concern with Bimal company does not constitute a supply. According to notification no.12/2017-Central Tax (rate) dated 28.06.2017, the intra state supply of services of transfer of business as a going concern would not attract tax under Section 9 of the CGST Act.

Therefore, the applicant need not pay tax for the merger as a going concern and the unutilized cash lying in its electronic ledger cannot be transferred to the Bimal company because the provisions Section 18(3) of the CGST/HGST Act and Rule 41 of the CGST/HGST Rules are only applicable unutilized input tax credit in the electronic cash ledger.

8. In Re M/s Pioneer Partners
(HAR/HAAR/R/2018-19/03 Dated 29.06.18)
Facts:
The applicant is a partnership firm engaged in the business of mining of Red Boulder, Soft Boulder and GSB in Haryana state and is registered under the CGST/HGST Act. The said minerals are classified under the heading 2516 and are levied 5% GST on their supply. The Haryana State government granted a mining lease for extracting “Stone along with associated with associated minerals” on various terms and conditions. According to the terms of lease deed, 16.46 crores of rupees shall be the annual dead rent or royalty which has to be paid in advance for one time before the commencement of mining operations and the rent/royalty will be decided upon the terms of auction.

Royalty on the mineral excavated and dispatched at the rate specified in the lease deed or dead rent whichever is more shall be paid on monthly basis. In addition to these, the applicant has to pay 10% as rural development fund.

Questions on which ruling was sought:
  1. What is the nature of the service provided by the State government to the applicant and under what head it will be classified under the GST?
     
  2. Whether the service comes under the chapter 9973 as licensing services for the right to use of minerals including its exploration and evaluation?
     
  3. Whether M/s Pioneer partners is eligible to discharge GST under reverse charge mechanism or whether the given service is excluded under Entry no. 5(1) and State government is liable to discharge the same?

Ruling:
According to the Notification no. 11/2017-CT (Rate) dated 28.06.2017 along with its annexure specifies that the classification 9973 includes licensing services for the right to use minerals including its exploration and evaluation. Royalty is the amount paid by the applicant for availing the right to use the minerals granted to it through lease for a specified time.

According to the notification the aforesaid services attracts the same rate of tax as on supply of goods involving transfer of title in goods. Hence it attracts 5% GST as provided in the notification.

According to notification no.13/2017-CT (Rate), dated 28.06.2017 under the CGST Act, 2017 and the corresponding notification no.48/ST-2 dated 30.06.2017 under the HGST Act, 2017, the person who receives the aforesaid services is liable to discharge the tax liability on such services on reverse charge basis.

9. In re BC Examinations and English Services India Pvt Ltd.
(HAR/HAAR/R/2017-18/11, dated 01.06.2018)
Facts:
The applicant is the subsidiary of BCUK viz. British Council United kingdom International Organisation for cultural relations and educational opportunities. The main objective of this council is to enhance the cultural and educational relations by offering to private individuals, students and other organisations examination services which support proficiency services in English language and other educational and professional qualifications.

These exams include IELTS (The International English Language Testing System), ESOL and other school exams provided by UK Exams Boards. BCUK also conducts exams at international level on behalf of universities in UK. To conduct these examinations in India, BCUK would like to take the administrative support from the appellant. The appellant helps the BCUK in organising and conducting these exams at various centres in India. For this purpose, BCUK would like to enter into an agreement with the applicant for providing Exam Support services and Student facilitation services.

According to the agreement, for these services, the applicant will be paid cost of test centres and dedicated staff, directly recruited by the applicant and an apportionment of indirect costs incurred which are attributable to exam support services. In addition to this cost, mark up determined in accordance with transfer pricing regulations.

Questions on which advance ruling was sought:
  1. Whether all the activities involved in the exam support services constitute a mixed supply or a composite supply?
  2. What will be the rate of GST applicable on these exam support services?
  3. What is the place of supply of these exam support services rendered by the applicant?

Tax authority's contention:
  1. The service provided by the applicant is a composite supply of services to conduct exams and other ancillary services to such services.
  2. Since it is a composite supply, the tax on principal rate of supply should be considered for all the others goods and services of the composite supply. In this case, the principal supply providing services of conducting exams. Therefore, the tax rate is 18%.
  3. The location of the recipient shall be the place of supply for the purpose of tax.

Ruling:
As per the proposed agreement, the services to be provided by the applicant are divided into 3 parts. Part A is for responsibilities of service recipient, part B states 8 types of exam support services and part C states services pertaining to student facilitation services.

The services in Part A and Part B are of such a nature that they cannot be provided in isolation. Thus these services constitute composite supply. The composite supply of service is taxed according to the tax rate of the principal supply good or service of that composite supply.

In this case, the principal supply is service of conducting exams. It is classified under the heading 9992 as education support service. According to the notification no. 11/2017 CT (Rate) dated 28.06.2017, the education support services are rated at 18% tax (9% CGST + 9% HGST).
 
10. In re M/s EPCOS India Pvt Ltd.
(HAR/HAAR/R/2017-18/9, dated 04.05.2018)
Facts:
EPCOS AG Germany is a subsidiary company of TDK Corporation Japan. The applicant is the wholly owned subsidiary of the German Company. The applicant is engaged in the business of manufacturing and selling of power banks under the “Make in India” initiative. The applicant has three manufacturing plants and four sales offices in India. It even exports its products all over the world. Power bank is an electronic device which is used to charge other portable electronic devices such as mobile phones, tablets etc.

Question on which the ruling was sought:
Whether the power bank can be classified under HSN classification 8504 having the title “Electrical Transformers, Static converters (example- rectifiers) and Inductors which attracts 18% IGST or (9% CGST + 9% HGST) according to Notification no. 41/2017 – CT (Rate) dated 14. 11.2017?

Ruling:
The applicant withdrew the application before it was given a chance of personal hearing before the authority and requested to put an end to the examination of the present application. Therefore, the application is dismissed as it is withdrawn by the applicant.

11. In re M/s Gitwako Farms (India) Pvt Ltd.
(HAR/HAAR/R/2017-18/10, dated 01.06.2018)
Facts:
The applicant is engaged in the business of supplying sheep/goat meet in different sizes and weight in a frozen state to Army and Para Military Forces. These frozen meat carcasses are put in LDPE bag as a primary packaging. This primary packaging is sealed with a tie and the weight of the bag is not mentioned on it. Then this primarily packaged bag is again packed with HDPE bags and is called secondary packaging.

These HDPE bags are dust and moisture proof food grading bags. These bags contain the details of the content inside the bags namely product name, firms name, brand, net weight, batch number, lot number, instructions for use and preservation. Then these bags are shifter to refrigerated vans for the purpose of supply.

Question on which the ruling was sought:
  1. Under what classification does the sale of frozen meat in packaged form will fall?
  2. What is the rate of tax on sale of frozen meat?

Tax authority's contention:
The frozen meat is packed in bags and therefore they are being supplied as goods in unit container and 12% rate of GST is levied on such unit of goods.

Applicant's contention:
The method they follow for packing does not constitute a unit supply of goods but rather a package designed to hold a pre-determined quantity as indicated on top of such package.

Ruling:
Entry no 4 under heading 0204 of Schedule II of the notification no. 1/2017- Integrated Tax (rate) dated 28.0.2017 specifies that meat of sheep/goat, frozen and put up in unit containers is subjected to 12% tax. But this notification was effective only till 14th November of 2017. From 14th November, a new notification was released called Notification no. 43/2017- Integrated tax (rate) dated 14.11.2017 in which schedule I deals with product which are subject to 5% GST.

Entry 1 of this schedule specifies that all goods other than fresh and chilled and put up in unit container bearing a brand name or bearing a brand name on which actionable claim is available are eligible to tax at 5%. But under the powers conferred under Section (1), the Central government exempted the inter-state supply of the products under the Sr. no 7, heading 0204 and 0207 from the levy of IGST.

According to the explanation to notification no.43/2017, “Unit container” means a package, whether large or small (for example tin, can, jar, box, bottle, bag, carton, drum, barrel or canister) designed to hold a pre-determined quantity or number, which is indicated on such package. To be classifies as unit container, it should be of pre-determined quantity. But in this case, the packaging may contain different weights. There is no uniformity in the weight of the packaging. Hence they are not to be called as unit containers.

The said product is exempted according to entry no.9 of Notification no. 44/2017- Intergrated Tax (Rate) dated 14.11.2017.

12. In Re M/s AOV Agro Food Pvt Ltd.
(HAR/HAAR/R/2017-18/7, dated 11.04.2018)
Facts:
The applicant is engaged in the business of slaughtering and processing of poultry/sheep/goat meat and supplies these products to domestic markets and Army against tender. The applicant also exports these products.

The meat is supplied to Army in different weights and sizes and in frozen state. The applicant also supplies chicken to Army in a similar manner. The sheep/goat meat in first put in LDPE bags which are not weighed and sealed. Then two LDPE bags are put into one HDPE bags. These HDPE bags are weighed and it is mentioned on top of the packaging. In case of chicken, there is no specific number of LDPE bags like 2 in the case of goat/sheep meat which goes into HDPE bags.

Question on which advance ruling was sought:
  1. Whether the sheep/goat packaging done by the applicant qualifies as unit container?
  2. Whether the whole chicken packaged in HDPE qualifies as unit containers?
  3. At what rate these products are to be taxed?

Applicant's contentions:
The packaging done by the applicant for the purpose of delivery do not qualify as unit container because they first pack the carcasses of meat in LPDE bags of no uniform weight and then put them into HDPE bag. Usually they put 2 HDPE bags of sheep/goat meet in one LDPE bag and around 20-25 bags of whole chicken packed in HDPE bags which is not weighed and sealed into one LDPE bag.

Ruling:
  1. According to the explanation given in the notification no.43/2017 – Integrated Tax (Rate) dated 14.11.2017, the ‘unit container' means a package, whether large or small (for example tin, can, jar, box, bottle, bag, carton, drum, barrel or canister) designed to hold a pre-determined quantity or number, which is indicated on such package. Also on relying on the cases cited by the applicant viz. CCE v. Shalimar Super Foods(2007 (210) ELT 695 (Tri-Mumbai) and Surya Agro Oils Ltd v. CCE, Indore(2000 (116) ELT 514.), it is clear that to be qualify as unit container, it is important that the package must contain pre-determined quantity.
     
  2. According to the Sr. no.1 of the Schedule I of the notification no.43/2017- Integrated Tax (rate) dated 14.11.2017, the products under the heading 0204 and 0207 viz. all goods (other than fresh and chilled) and put up in unit containers bearing a registered brand name on which actionable claim is available. But the notification no. 44/2017 issued by the Central Government under Section 6(1) of the IGST Act exempted the said products from the levy of IGST in case of inter-state supplies.

13. In re M/s Paras Motor Industries
(HAR/HAAR/R/2017-18/8, dated 26.04.2018)
Facts:
The applicant is engaged in the business of fabrication and fitting out on the chassis supplied by its customers. The roadways corporations of various states constitute majority of its customers. For this purpose, the applicant enters into a contract with its customer and the terms of the contract lay down the specifications according to which the work has to be done by the applicant. The applicant contended that this transaction between the applicant and the customer is considered as job work by some tax authorities and some other consider it as contract for sale of goods.

Questions on which ruling was sought:
  1. Whether the activity of fabrication and fitting and mounting of bus bodies on the chassis supplied by the other party is a job work (SAC 9988 or contract of sale bus body under HSN CODE 8707.
     
  2. What is the rate of tax that is levied, if the transaction is held to be a job work?

Applicant's contentions:
A bare reading of the Section 2(68) gives us clarity as to what is meant by a job work. It is defined as any treatment or process undertaken by a person on goods belonging to another registered person. Therefore, the work undertook by the applicant under a contract is clearly falls under job work.

The Supreme court in the case of M/s Kailash Engineering co. v. State of Gujarat (15 STC 574), held that the contract entered into for the purpose of building, erecting and furnishing of coach bodies on the frames supplied by the railway does not constitute a contract for sale of goods.

In the case of M/s Mahindra Coach Factory Pvt Ltd v. Commercial Tax Offcier, Jaipur, the Rajasthan High Court held that the contract for fabrication of bus is a works contract. The State government also notified that fabrication and fitting of bus body in the chassis supplied by the other party is a work contract under HVAT 2003.

Tax authority's contention:
The main activity of the applicant is the supply of the bus bodies and the work of fabrication and fitting is only an associated work to the supply and the supply is covered under HSN code 8707.

Ruling:
CBEC issued a circular no 34/8/2018-GST dated 03.03.2018 in which clarity is given that the activity of bus body building is composite supply of goods and services. The facts and circumstances of each case determine which will constitute a principal supply.

In the present case, on the chassis provided by the customer, the applicant undertook no activity except fitting of bus body on the chassis. The bus body manufacturing requires raw materials and other inputs whose costs is included in the amount charged by the applicant on the final product supply. Thus, the activity of the applicant is not a mere job work of fitting but also a supply of bus body. To this supply, the fitting of bus body is ancillary activity to the principal supply of bus body.

Therefore, the activity is a composite supply with supply of bus body as a principal supply as classified under HSN code 8707.

14. In re M/s Espirit India Pvt Ltd.
(HAR/HAAR/R/2017-18/6, dated 11.04.2018)
Facts:
M/s Espirit De ACorp. (Far East) Ltd, Hong Kong is a fellow subsidiary of M/s Espirit Europe Service Gmbh, Germany engages in providing sourcing services of goods including wearing apparel, shoes, fabrics and accessories on an international level for Germany company.

The applicant is the subsidiary of the Hong Kong Company and works for the Hong Kong company as a sub-contractor to provide the services of sourcing to the Germany company in India. For this purpose, the applicant and the Hong Kong company entered into an contract.

As per the contract, the role of the applicant company is determined as follows:
  1. Conducting market research to understand the conditions of the market, price for the Espirit products in Indian market and advising on the best possible price, quality of the products of the company.
  2. Assisting in the protection of the trademark of Espirit and to comply with the procedure for the protection of trademark.
  3. Collecting data for the purpose of analysing vendors on the basis of experience, reputation, quality of product, price etc.
  4. Maintaining the list of suppliers in India.
  5. Conducting quality checks at various stages of production.
  6. Arranging logistics for the supply of goods.
  7. No role in invoicing and payment process.

Questions on which ruling was sought:
  1. What is rate of GST for the services provided by the applicant to the Hong Kong company?
  2. Whether these services can be classified under Export of Services so that they attract 0 rate of tax.
  3. Whether the applicant is eligible to claim refund of GST paid on input services or goods or both.

Ruling:
According to the Explanatory notes to the Scheme of Classification of Services along with Notification no.11/2017-Central Tax (Rate) dated 28.07.2017, the services provided by the applicant are taxable in the following manner:
  1. Market research
    998371- Market research services
    Taxable under @ 18% [ S.No. 21(ii) of Notification no. 11/2017]
     
  2. Trademark Protection
    998599- Other support services
    Taxble under 18% [ S.no. 23(ii) of Notification no.11/2017]
     
  3. Identification of suppliers
    998599-Other support services
    Taxable under 18% [ S.no. 23(ii) of Notification no.11/2017]
     
  4. Negotiation with suppliers
    998599-Other support services
    Taxable under 18% [ S.no. 23(ii) of Notification no.11/2017]
     
  5. Inspection and quality control
    998311- Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management.
    Taxable at 18% [ S.no. 21(ii) of Notification no.11/2017]
     
  6. Logistics
    998311- Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management.
    Taxable at 18% [ S.no. 21(ii) of Notification no.11/2017]
According to Section 16 (1) of the IGST Act, ‘zero rated supply' means export of goods or services or both; or supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit but ITC can be claimed on zero rated supplies though it is exempted from tax subject to Section 17(5).

What constitutes export of services is laid down in Section 2(6) of the IGST Act. Whether the supply of services in this case constitutes export of service or not depends upon the place of supply. If the place of supply is located outside India then it is export otherwise not.

Therefore to decide whether the supply of the applicant is export or not, first the place of supply is to be determined which is outside the jurisdiction of AAR under Section 97(2) of the CGST/HGST Act.

And also the claim regarding ITC on input goods and services utilised in the processs of export of services is also dependent on the ‘place of supply'. Therefore the last two questions are out of jurisdiction of the HAAR to decide upon.

15. In re M/s Action Construction Equipment Ltd
(HAR/HAAR/R/2017-18/5, dated 10.04.2018)
Facts:
The applicant is engaged in the manufacturing business of Cranes, Backhoe Loaders, Forklifts, Motor Graders, Compactors, Tower Cranes, Tractors, and Harvesters etc. The applicant also manufactures Truck Mounted Cranes (TMC). For this purpose, the applicant buys readymade trucks from truck manufacturers say Ashok Leyland, TATA etc., and on these trucks they fix cranes which they manufacture. These cranes which are used to lift heavy loads are of various lifting capacities like 20 tonnes, 25 tonnes, 40 tonnes etc.

Question on which ruling was sought:
Whether TMCs will fall under the HSN classification 8426 or 8705?

Tax Authority's contention:
The products under classification 8426 are ship's derricks, cranes including cable cranes, mobile lifting frames, straddle carriers and works truck fitted with crane and the classification 8705 consists special purpose vehicles, other than those principally designed for the transport of persons or goods (for example breakdown lorries, cranes, fire fighting vehicles, concrete-mixture lorries, spraying lorries, mobile workshop, mobile radiological units).

The TMCs are special purpose vehicles for the purpose of lifting, loading and unloading heavy loads. But under the classification 8426, “works trucks fitted with a crane” is also included.

Ruling:
After perusal of both the classifications, it is clear that classification 8426 covers ship's derricks, cranes including cable cranes, mobile lifting cranes, straddle carriers and works trucks fitted with a crane and the works truck is itself classified under 8709. The classification 8709 includes works trucks, self propelled, not fitted with lifting or handling equipment, of the type used in factories, warehouses, dock areas or airports for short distance transport of goods.

Thus works trucks itself falls under 8709 and when it is fitted with cranes, it falls squarely under 8426. But the trucks they use to fit cranes are purchased by them from either Ashok Leyland or TATA and these trucks are used for transport of goods. These trucks fall under the classification 8704.

Since they are not works trucks, they won't fall under 8426. When a crane is fitted upon a truck covered under the classification 8704, it will become special purpose vehicle. Therefore they fall under 8705.

16. In Re M/s Loyalty Solutions and Research Pvt Ltd.
(HAR/HAAR/R/2017-18/4, dated 11.04.2018)
Facts:
The applicant is the owner and operator of a reward point based loyalty programme that is integrated towards its partners and customers. Every end customer will get reward points by purchasing products from the partners of the applicant. These rewards points will be redeemed by the customer within 36 months.

In case of failure to redeem, these points will be forfeited by the applicant. M/s Nice Chemicals is one of the clients of the applicant. One reward point of the applicant is equal to 0.25 Indian Rupee. The applicant enters into agreements for the above purpose with every client. For providing the above services, the applicant charges management fees as well as Service charges. The applicant is paying GST on Management fees as well as service charges paid by Nice Chemicals.

Question on which advance ruling was sought:
Whether the value of forfeited points would be considered as actionable claim other than lottery, gambling or betting and thus would not constitute supply of goods and services according to section 7 read with Schedule III of the CGST Act and HGST Act.

Tax authority's contention:
It is not an actionable claim as the applicant did not submit that they will give back the money issued to them while giving the reward points by the partners if the customers did not redeem it within the validity period and GST will be levied under CGST, HGST and IGST Act because the applicant receives issuance fees from the partners on issuance of payback points. These points are used by the customers as a discount. The applicant transfers these payback points consisting of 0.25 rupees per point and this transaction between the applicant and vendor attract GST.

Ruling:
The value of the points forfeited by the applicant would amount to consideration for services provided by the applicant to its clients and thus would not constitute an actionable claim other than lottery, gambling or betting. Since it is not an actionable claim, it would fall under supply of services according to Section 7 of the CGST/HGST/IGST Act. Therefore, GST can be levied on them.

17. In re Fastway Transmissions Pvt Ltd.
(HAR/HAAR/R/2017-18/1, dated 16.03.2018)

Facts:
The applicant is a multi system operator and engaged in the business of providing cable TV services.

Question on which advance ruling is sought:
Whether local cable operators to whom signals of cable TV are provided by the applicant as MSO are agents of the applicant for the purpose of liability to GST of the applicants on services provided by the LCO to the end customers.

Ruling:
The applicant applied for the withdrawal of the application for advance ruling. On the basis of that application, the authority dismissed it as it is withdrawn.

18. In re M/s Roulunds Braking India Pvt Ltd.
(Advance Ruling No.3, dated 26.03.2018)
Facts:
The applicant is engaged in the manufacturing of Brake Pad and Auto Parts. At first, the applicant's products were taxed according the HSN classification 6813 and the applicant also paid GST of 18% accordingly. Later it was taxed according to the classification 87083000 which is 28%.

Question on which advance ruling was sought:
Whether the products manufactured by the applicant fall under the HSN classification 87083000 attracting 28% GST or under the HSN classification 6813 attracting 18% GST.

Tax authority's contention:
The products that the applicant is manufacturing do not fall under HSN classification 6813 because the classification is for frictional material and articles. Brakes do not constitute frictional material. The HSN classification 87083000 is for Brakes and Servo-brakes and parts thereof. For the manufacturing of brake plates, the applicant use frictional material and paste it on the sheet metal back plate which is called ‘mounting'. But still the classification 6813 is not for brakes. Therefore, the brake pads would fall under the classification 87083000 attracting 28% GST.

Ruling:
After the clear perusal of the above stated classification, it is clear that classification 6813 specifically excludes mounted friction material and articles thereof for brakes. The brake pads are manufactured through the process of mounting of frictional material.

Therefore, the products in question would fall under the classification 87083000. According the notification no. 1/2017- Central Tax (Rate) dated 28.06.2017, the brake pads for the purpose of brake assembly and its parts thereof for tractors attract 18% GST and if the same is used for the vehicles mentioned under 8701 to 8705 and excluding tractors then it attracts 28% GST.

Written By:
  1. Rachana Panguluru, Final year student of B.A., LLB (Hons.), Damodaram Sanjivayya National Law University, Visakhapatnam and
  2. Vamsi Krishna Bodapati, Final year student of B.A., LLB (Hons.), Damodaram Sanjivayya National Law University, Visakhapatnam.

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